Transcript:

CAROLINE WOODSLet’s look ahead to 2026 with Jay Woods, Chief Market Strategist at Freedom Capital Markets. He joins me here at the desk today. Great to have you here.

JAY WOODSGreat to be here.

CAROLINE WOODSLet’s kick things off. What’s your best investment idea for the new year?

JAY WOODSWow. That’s an investment. I shrug when I say this, but I think Tesla, from a tactical point of view, maybe time to get back in. But if you’re going to get in this, have a stop loss set. This stock just broke out of a five year base, a one year trend, a five year trend, multiple time frames. As a technician, I look to price action to tell us what’s going to lead and going into year end.

JAY WOODSThis is a historical breakout. Then when you put the fundamental story, you got to hold your nose when you buy this one. Because if you’re going to focus on car sales, you’re going to be disappointed. We are buying this on the hopes and dreams that Elon Musk gets things going with that pay package and the robotics story and the autonomous driving story is really what we buy into.

JAY WOODSGoing forward, the car sales that where that ship has sailed long time ago. But the technology, what he’s doing and those goals for the future. And then think about it, he just navigated a whole year in the Trump administration and came out okay. So I think this could be the year of Musk and the year of Tesla. If this does drop below 420 a favorite number of Mr. Musk, I would get out and take a little bit of a loss.

JAY WOODSBut I think it’s poised to have a great 2026.

CAROLINE WOODSWhat about the rest of the magic seven? Is 2026 going to be the year that tech leaves again, or is it going to be the year of the other 493?

JAY WOODSYeah, I think this is going to be the year of the other 493. And I think 2025 when we look at it, it kind of was that magic seven was more of a lag seven, where you only had two performing stocks in it. Google and Nvidia that actually outperformed the S&P 500. So to me that those other five still have their time, but meta has broken down.

JAY WOODSMicrosoft is a little toffee apple slow and steady. Not a bad stock to own. But is you going to have that explosive growth? No. Google is where I still want to be. I think their story, the whole picture there is just tremendous technically major breakout. Amazon is the disappointing one to me. Is someone that owns the stock and touted it last year.

JAY WOODSI want to see it break and stay above 240. It struggles to do that. I still think it’s there for them to actually have a great year. We’ll see if they can go. But you know, the magic seven right now. It’s probably in a congestion phase where it goes sideways in a neutral trend for a while.

JAY WOODSAnd that explosive growth, the momentum, it seems to be losing that, steam. So we’ll look at other places for opportunities.

CAROLINE WOODSAnd where are those other.

JAY WOODSWell, that’s the problem. Boring is back. We’re going to see the financials, which had a great year this year. Continue to do well. Industrials continue to do well. Nice trajectory strong growth. The growth is there. The economy is doing fine. It’s just not those high growth names with the explosive upside that we’re going to see. So we’re going to have more winners than losers in 2026.

JAY WOODSBut when the leadership or stocks that don’t have the big enough weighting to carry the major indexes to highs, I prefer the Dow over the S&P 500 because it’s price weighted. I still think Goldman’s going to have a good year. JP Morgan looks great. And my favorite in the financials would be Citigroup. So financials still where you want to be.

JAY WOODSMaterials starting to pick up a big energy is the X factor. I don’t want to say hey go in on energy because it hasn’t shown us that it’s there yet. With crude breaking now 55, as we take this along the trajectory to go a little lower, I think that will be a big opportunity at some point in 2026 to jump into the energy names Exxon Mobil in particularly.

JAY WOODSBut right now I want to see how, you know, the turmoil with Venezuela, Ukraine, Russia, they resolve themselves before I jump in. But I think oil is something to keep an eye on as well.

CAROLINE WOODSSo if it’s not mega-cap tech that’s leading this market higher next year, do we have to level set our expectations in terms of what we could potentially see in terms of returns? Yeah.

JAY WOODSWell, I think when you look at it historically, second year of a presidential term, we saw it in 2018 was a rough year under Trump, 1.0. We’re going again into that election cycle. We have tariff uncertainty still looming. The Supreme Court decision did not. It doesn’t appear to be coming up before the end of the year.

JAY WOODSSo that should be something we watch in January that will throw uncertainty. If the tariffs are deemed illegal, then we have to look at what the Trump administration does to try to go around it, and then how companies react to it and what it does to inflation. That CPI number has ticked up. Unemployment has ticked up. So we do have fears when it comes to the dual mandate that the fed is watching, that there are concerns.

JAY WOODSAnd then speaking of the fed, we have a new leader coming in in in May for that May meeting. So we have three more meetings with Jerome Powell. Listen, for him to set the tone for his legacy. I think that legacy is to look back at how he did navigate that soft landing, if not no landing.

JAY WOODSWorst case scenario. I think he will be judged well over time. And he’s going to set that tone. And then the independence of the fed, he’s going to stress that going forward. But when a new fed chief comes in, I don’t expect everybody to just okay, now we’re cutting rates. No, it’s a big committee. And for those that think he’s going to get a new fed chief, rates are going to go lower and this is going to help boom, the stock market.

JAY WOODSI just don’t see that coming.

CAROLINE WOODSSo some red flags as you think about next year, should investors be preparing for a pullback?

JAY WOODSI think you can just rotate. And rotation is the theme we’ve seen in the last quarter very heavily. And you want to get a little more defensive. Look at the consumer staples stocks like General Mills Procter Gamble Clorox have been beaten down. Just horrible downturns. But we’re starting to see signs of a bottom. First they pay a nice dividend.

JAY WOODSThat dividend has increased because the price has gone down. So it could be a good place to park your money for a little while. And you’re not going to get that day to day excitement you get with some of these tech names, but, it’s a smart way to play it. And then technology is not going away. Cybersecurity stocks still look great.

JAY WOODSBut it’s hit or miss. And we have red flags with Oracle. And we’re talking about the debt issuance. And how that will play out. There’s a lot of smoke around that story. And that gets me a little concern going forward. So I think shape is the way people are going to play it. And that’s why you want to look for some of these beaten down names to try to make a turnaround.

CAROLINE WOODSSo boring is back for.

JAY WOODSNext morning’s big.

CAROLINE WOODSTime to get defensive.

JAY WOODSYep.

CAROLINE WOODSWhat would you say is your most unpopular opinion for next year?

JAY WOODSWe’ve seen some topping patterns here. We see it already in Netflix and Costco. Stocks breaking down. I’m concerned that this is going to come into some of those big names, like a Microsoft, dare I say Nvidia, Nvidia has been testing support around this 175 level for quite some time now. I do not think it’s going to happen, but I am watching price action very carefully in Nvidia because we’ve seen pockets where it’s consolidated over a long period of time six months, seven months, that would be most of next year.

JAY WOODSSo I don’t think it’s going to be the one stock that we want to be in. But if I owned it, I wouldn’t sell it based on any of that. So the concern is just congestion, some consolidation, a few breakdowns here and there. And then, let’s see what policy and an election does to this market. I am not by any means saying this bull run is over, but the stampede higher is going to be slowing down, and we’ll see minimal gains overall for the indexes with, some good pockets of volatility.

JAY WOODSSo the traders back here will be pretty happy about it, that’s for sure.

CAROLINE WOODSIf investors need to remember one rule for next year, what would it be?

JAY WOODSOne rule. Patience. It’s always patience. But, next year I think we’re going to need it a lot. We were ignoring headlines early, this year, and, that did as well, because when that market sold off on Liberation Day and some of the headlines that followed, you know, 100 deals in 100 days, remember, those headlines didn’t ever come to fruition.

JAY WOODSJust focus on those trends. Focus on opportunities. And those that did this year were rewarded nicely. And I think if we’re patient, we’ll be rewarded as well. But those big gains, they may be tough to come by. I hope I’m wrong. There.

CAROLINE WOODSAll right. Jay Woods, always a pleasure.

JAY WOODSThank you. And happy New Year.

CAROLINE WOODSHappy New Year. That’s Jay Woods, chief market strategist at Freedom Capital Markets.